Renewable Energy in India's Rice Belt: Husk Power Systems

Site: IndiaSector: Renewable energyChallenge: More than one billion residents of India have no electricity and many of them live in remote villages off the electricity grid.Solution: $750,000 in debt financing for Husk Power Systems Inc. to cover the installation throughout rural India of 36 “mini energy generation facilities” that burn discarded rice husks to generate electricity.Impact: Clean electricity provided to thousands of rural Indians.

Rice is a staple of the diet in India. But rice husks, the hard protective coatings that surround the rice, are typically discarded in the milling process. Back in 2002, two entrepreneurs looking for ways to expand

access to power and promote development in rural India discovered that some small rice millers were mixing these discarded husks with the diesel they burned as a way to reduce their diesel consumption and save money.

The team – childhood friends Gyanesh Pandey and Ratnesh Yaday -- had already explored ways to promote solar or wind power in rural India. But when they began to study the biomass properties of the rice husks, they realized that the technology needed to convert the husks to electricity was especially simple,

and well suited to small rural villages with limited technical capabilities. The entrepreneurs recognized that, when not combined with diesel, the rice husk biomass could be gasified without emissions, resulting in clean energy for the local populations.

Electricity and light transform small villages

Pandey, an engineer who was working in Los Angeles at the time, and Yaday, an entrepreneur based in India, understood that the widespread lack of electricity was a key barrier to development. About one-third of the country’s population, spread across some 125,000 small rural villages, lack access to electricity. And although the Indian government had already adopted a number of policy reforms to increase power generation, these policies often did not benefit the rural villages that needed power the most, since many are located far from the country’s utility grid. To execute on the concept of rice husks as biomass, the team turned to Gyanesh’s college friends, Manoj Sinha and Charles Ransler, both graduates of the University of Virginia’s Darden School of Business.

Ransler, who had previously headed a small software firm, and Sinha, a native of India who had worked for years as a microprocessor designer at Intel, helped to formally launch Husk Power Systems with the prize money they won in various business plan competitions expounding on the off grid distribution model. In 2008, for example, the Center for Social Innovation at the University of Texas named Husk the winner of the Most Compelling Idea to Change the World competition.

As a young business, Husk quickly demonstrated an ability to make a meaningful difference in the lives of rural Indians by establishing a series of strategically placed mini-power plants in remote villages. Children now had sufficient lighting to do their homework at night and villagers reported an improved sense of security: When light came to a village, even reports of dog bites and snake bites declined. By the time OPIC learned about the business in 2008, it was a simple start-up, delivering power to only to two rural villages of about 1,000 people, but the founders had plans to expand into hundreds of additional villages over the next few years.

In June of 2009, OPIC, which has made investing in renewable resources a top priority, committed a $750,000 loan to Husk Power for the development of an additional 36 rice husk-powered generation facilities. Although this deal was a comparatively small investment for OPIC, it was critical to Husk, which had been unable to obtain sufficient funding from the Indian government or private investors to cover its expansion. And because the technology used to convert rice husks to electricity is fairly inexpensive on an invidual basis, the OPIC money could be used to establish plants in many villages.

“OPIC’s funding was a game-changer for us,” said Husk President Manoj Sinha. “OPIC proved that a project like this was debt financeable, and could therefore offer attractive returns for venture capitalists and more conservative investors, by leveraging assets. It’s not easy finding a loan in India, so OPIC proved to be a real shot in the arm for us.”

Because there is such an abundance of rice in India, rice husks offer an abundant supply of renewable energy. In 2007, for example, India produced more than 141 million tons of rice. Every ton leaves about a quarter ton of rice husks, most which is dumped in landfill.

Mini power plants are simple to operate, managed by local villagers

Husk’s process for making electricity from biomass is based on gasification, in which the rice husks are heated to high temperatures, causing the materials to decompose into a mix of combustible gases. The gases are then burned to produce heat or steam that activates a gas turbine, and produces electricity.

Husk distributes power through a “point-to-point” system that connects each household or business directly to the power station through a main line. A village manager estimates the likely power consumption of each customer based on their lighting and appliance requirements and this estimate is used to determine an appropriate prepayment.

The basic connection through Husk provides a household with two 15-watt compact fluorescent lights, together with mobile phone charging throughout the period each day that the plant runs (up to eight hours in the evening). Sometimes poorer households share a basic connection and get one light each. Households and business can also pay more for a higher power connection, however the system is designed so that a fuse blows if the customer attempts to use more than the agreed-upon amount. Each mini-power plant serves about 500 customers. Husk works strategically to locate in plants in remote villages where it can reach a large number of households. It has achieved an average penetration rate of 75% within the first two months of operation in a new village.

One of Husk’s value propositions is to build plants that are so simple to operate and maintain that village people with limited education can be trained to manage and run them. The company trains a local operator, electrician, fuel handler and fee collector to run each plant and maintains a specialized regional staff to help with problems.